traded products

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Deutsche Bank - Paragon Induction Pack

Risk ManagementTraded Products

Document Owned By DB Functional Team


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Introduction

Primary Navigational Flow of the functionality

Key terms

Details of UI screens Purpose of the screen and important workflows

Purpose of the document

To provide a high level understanding of the functionality and featuresavailable in the Paragon Traded Products Module

Intended Audience

DB Account TCS Team

New Inductees in the DB Account

Contents

Individual should have read the Paragon Initial Induction Document

Prerequisites


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The Traded Products module deals with all the products in which DB is doing businessvia Margin and Derivatives trading activities. In DBs term these are covered under the

Global Markets area

Products under Traded Product include

FX (Spot and Forward) , Futures and Option

Swaps, Bonds, Equities, Options, Repo, Metals, Commodities

Money Market Derivatives, Money Market Cash Instruments (Call / Term Deals), etc.

Limits can be defined and exposures can be monitored at a portfolio level for variousderivatives and products for DB customers.

Credit Facility is created as per the legal agreement signed between the customer andbank for the specific trading clauses

Netting Agreements can be captured which are used to net exposures acrosscounterpartys branches that are participating in the agreement.

To enable effective utilization of Limits, Clustered Portfolios are being supported. Thishelps to assign a single umbrella limit to cover transactions on different products andacross different legal agreements / counterparties.

Traded Products in Paragon


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Traded Products in Paragon

Features supported are:

Maintenance of Facility (ISDA, OSLA, Undoc, etc.), participating branches (external andinternal) and netting agreements.

Capture Null, Not Null and Grey Limits

Capture Tenor Wise Limits and monitoring Exposures for Portfolios (Single andClustered)

Clustered Portfolios

Monitor Current Credit Exposure [CCE] provided via Risk Engines

Monitor Potential Future Exposure [PFE] provided via Risk Engines

Capture of Probability of Default (PD) and Loss Given Default (LGD) details atPortfolio/Limit level

Maintaining of Approved Limits (Live) and Pending Approval (Pending) Limits. Display of Trade Details

Note

Grey Limits are set up to manage exposure to certain extra-ordinary deals, which wouldotherwise breach the actual limit in terms of tenor. Grey Limits are set for tenor beyondthe maximum tenor.


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Key Terms

Facility

Traded Product facility is derived from the legal agreement between DB and the external

customers and is as per the agreed standard trading clauses (ISDA , REPO etc)Limits are not captured at facility level .Business Area is added to a facility which formasa Portfolio .Limit is assigned to this portfolio

Participating Branches and Netting sets are captured at facility level

Participating Branches

Set of branches for both the external and internal counterparties which can participate in

the trading under one facility. It is captured at facility level.Participating ProductsFor each facility type (i.e. legal agreement type) there is a fixed set of products for whichtrading activities can be performed .While setting participating branches all or some ofsuch products can be selected based on what is mentioned in the legal agreement

Business Area

In real market trading activities happens on many products. From credit risk

management perspective these products have been classified in multiple groups andeach of these groups is known as Business Area . Credit Officers monitor the limit atBusiness area level

Portfolio

A facility can be created for trading in multiple business areas. Limit can be assigneduniquely for one business area .Combination of facility and a business area is known asPortfolio .In traded product module limit is assigned to a portfolio


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Key Terms

Netting Set

At Legal agreement level it is agreed that for certain participating branches and productsexposure netting can be done .That is the amount overdue on DB or customer and vice

versa can be adjusted .Sets of such branches and products is known as Netting set .Thisis primarily done for correct exposure calculation (credit netting) and for satisfyingregulatory economic capital requirements (regulatory netting)

Limit

Maximum amount that borrower can borrow under a facility is called Limit. It is assignedto a single tile or a clustered portfolio.

Availability

The difference between a limit and the aggregate of current borrowings outstanding .

Utilization (Exposure)

This is the amount which has been utilized by the borrower out of the limit granted.

Example

TCS has been granted a Limit of 100 and out of that 60 has been utilized so availabilitywould be 40 (Limit Utilization)

Limit = 100

Utilization = 60

Availability = 40


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Traded Products module is accessed through the Paragon Main Page by clicking on theTP node

The navigation to various screens in the TP module can be done via the menu options. Furthernavigation can also be done from individual screens

Traded Products Module


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Counterparty List isused for searching thecustomer record basedon the availableparameters .

User fills in the searchtype and then pressesGo button, list ofcounterparties isdisplayed based on thesearch type

The Product Group overviewScreen can be opened from here.For this user mark the desiredcounterparty , right click andselect PGO.

Counterparty List


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Primary Navigation

Traded Products( View List)

Portfolio List

Create Clustered Portfolio

Modify Single Tiled Portfo

View Portfolio

Create Limit

View Limit

Set PFE multiplier

View Trade Details

CSA ID Details

Portfolio Ratings

Business Owner

Netting Set List

Modify

Authorize

Delete

CSA Id search

Facility List

Participating Branches

Annotation History

Legal Status

CSA IdModify Facility

Delete Facility

View Facility

CSA Details

Add Business Area

Portfolio List

Netting Set List

Counter Party List

Delete Zero Limits

Product Group Overview

View Facility Overview

Create Facility

Create Masters Master

View Masters Master List

Business Area Overview

Portfolio List


Master Masters Business AreaPortfolio ListFacility

Modify/ Del/View

Create Netting

View Netting List

Create Add/ View/Delete


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Participating Branches & Netting Set

Portfolio

Facility

Miscellaneous

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Create FacilityWhen the legal agreement between DB and the external customers is through, trader

requests the credit officers to sanction the credit limits so that the transactions can beinitiated .Details like Product , Requested Limit amount are provided by the trader

For Margin products credit officers have to make sure that a legal contract is in place beforeapproving a limit . Based on the contract a facility is created and participating branches andnetting sets are defined

Appropriate business area is added to a facility which create a portfolio. Limit is assigned tothis portfolio

Facility is created by using the Traded Product PGO screen

Facility becomes active only when the credit application approval is done for the customer

hierarchy


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To create the facility the compulsory fields marked in yellow has to selected from theQBEs and saved.

Create Facility


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Facility - Status Workflow

On Hold

Pending AuthSend Back Reject

Active

Pending Mod. Auth

Pending Closure

Deleted

Create

Authorise via Credit Application


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Facility List

Facility List is used for searching the facility record based on the available parameters .User fills in the search type and then presses Go button, list of facilities is displayedbased on the search type

Facility List further provides navigation to Facility Details screen which is used for facility

data maintenance (modification, deletion etc)


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Facility Details Key Elements

This panel provide thecustomer details, facility id,type & status .DB Entityindicates the DB internalsubsidiary which willfacilitate transactions.

This panelprovides the list ofproducts which areavailable under aparticular facilitytype.

This panel providethe netting set id ,status and thedescription

This panel providethe internalcounterparty whichparticipate in thefacility

This panel providethe Externalcounterparty whichparticipate in thefacility


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Modify Facility

In order to maximize profits and minimize risks , it is regularly required to update theearlier approved limits .Based on the business scenario , limits may be increased ,

decreased or completely eradicated for the customersAll such updates are done via Facility Details screen and are approved after credit

application is released

Covered under PGO


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Screens for Other Attributes

Annotation/ HistoryIt is possible that while creating or

modifying a facility , user may like toenter some comments for futurereference .This screen is used for thatpurpose . Annotation history contains thelist of past comments entered in Paragon

Legal StatusThis screen provides the details of legalstatus of the facility


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Add Business Area

A Business Area identifies a product/product group or trading desk within GlobalMarkets that can trade under the legal agreement (facility).

Once a business area is attached to a facility an active null single tile portfolio iscreated for the same .Limits can then be assigned to this portfolio which will requirecredit approval


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Portfolio

Facility

Miscellaneous

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Key Terms Objective

The objective of Netting is to downsize the agreementsbetween the internal and external counterparty to a single

claim in case of termination of events, bankruptcy ofcounterparties, etc.

In paragon we deal with two types of netting- Credit line Netting- Regulatory Netting

Netting Agreements are captured and are used to netexposures across counterpartys branches that areparticipating in the agreement.

Benefits

Reduction of Settlement Risk Reduction of Credit Risk Reduction of Liquidity Risk

Set of DB (internal) and counterparty (external) entities whichallow for netting according to the legal documentation.

Netting set is captured at facility level Paragon allows multiple Netting Set.

Netting Set

Netting

For more details on Netting please refer the Paragon Legal Module Document.


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Add Product & Participating branches

Add product & Participating Branches screen is opened via Modify Facility Details screen as

shown above


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Add Product & Participating branches

This contain theproducts which isavailable forparticipations fortrading under afacility

Participatingproducts aremoved to thispanel from theavailable productscreen

This contain theCounterpartyname , DB Entity, Facility id &type

This contain theset of ExternalCP which canparticipate in thetrading under afacility.

This contain theset of Rankedinternal CPwhich canparticipate in thetrading under afacility.

This contain theset of UnrankedInternal CPwhich canparticipate in thetrading under afacility.


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Netting Set Status workflow

Clicking Authorize button willresult in error User who has

entered or modified the recordcannot authorize it

This happens because NettingSet works on 4 Eye principle

Login as different user and onpressing the authorize button, itwill be authorized successfully

PGO

Facility List

RejectView Netting Set List

Authorize (Active)

Modify

CP List

Create Netting (PndgAuth)

Facility


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Create Netting Set

To create Netting Set first the counterparty has to be selected. For this user fills in thesearch type and then presses Go button, list of counterparties is displayed based onthe search type

From the list of counterparties , select a counterparty right click and select PGOscreen. From the facility list screen ,select the relevant facility and then click theCreate Netting Set option.


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Create Netting Set screen details

Simultaneously the list of Internalcounterparties eligible for Netting Setgets displayed in this screen

After marking the flag both in external& Internal CP Insert button is pressedand the data from both the screenmoves in to Netting Set screen post

which it is saved & closed .

When from the Product Type QBE a

product is select and the list ofExternal Counterparties getsdisplayed in this window.

Netting Sets are defined for the set of participating branches of the facility .Hence Facilityparticipating branch data is a super set for Netting set


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Create Netting Set screen details

After pressing the insert button the selected counterparties moved to the Netting Setscreen ,the status at this time is Pndgauth .


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Netting Set - Authorization

To change the status from PndgAuth to Active , from the Netting Set list authorization hasto be done from a user other than the user who has entered the record.


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Netting Set - Authorization

Error message got reflected, as User who has entered or modified the record cannotauthorize it since the same user who created the Netting Set also tried to authorize the

netting set.


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Netting Set List- Modify, Delete

Netting Set can be modified or deleted from the Netting Set List.


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Portfolio

Facility

Miscellaneous

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Portfolio List -1

Portfolio list can be opened through PGO screen . Further navigation can also be donethrough individual screens


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Portfolio List -2

Navigation to Create Clustered Portfolio is done through PGO screen

From the CP hierarchy, Select group or the counterparty option, right click and select

Create Clustered Portfolio.


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Modify/View Single Tiled Portfolio

Both single tile portfolio and clustered portfolio is modified via Portfolio list screen. For thisselect the single tile portfolio which has to be modified, right click and hit the modify option.Make the necessary change/s and save the same.


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Navigate to this screen using Create Clustered Portfolio option on Potfolio List Select a counterparty from the CP hierarchy , right click and press View Single Tile

Portfolio.

On click of the said button the list of all the single tile portfolio will be displayed.

C t Cl t d P tf li


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Thispanelshowsthecounterpartyhierarchy

On clickingthis checkboxes allthe SingleTile Portfoliogetsdisplayed

On this panel thesingle tile portfoliogets displayeddependingwhether CP orGroup is selected

This button is used to move theSingle tile portfolios to ClusteredPanel .The single tile goes intopending linked mode andbecomes the part of clusteronce this is approved via creditapplication

This button is used to removethe portfolios from theClustered Portfolio Panel. Ifportfolio is un-clustered the itgoes into pending de-linkedmode and becomes a livesingle tile once this isapproved via creditapplication

On clickingthis checkbox, theclusteredportfolio getsCollateralized

Portfolioswhich has toclustered aremoved fromSingle tile tothis panel viamove button


Cl i C


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Clustering Concepts

Clustering

Grouping of two or more Single Tile Portfolios into a single clustered portfolio againstwhich Credit Officers can set operational limits in a more flexible way. A portfolio can

either be horizontally or vertically clustered.

Vertical Clustering

Clustering across counterparties or facilities but covering a uniform Business Area

Tata Group

Tata AIG

TCS

Tata Sons Ltd ISDA-EQUIV

DB Lon

DB- Tokyo

Facility 1

Legal Agreement DB Entity Business Area Facility

ISDA-EQUIV DB- HK

ISDA-EQUIV DB- SNG Facility 2

Facility 3

Facility 4

FX

ENERGY

BONDOPTIONS

BASE METAL

ISDA-EQUIV REPO

REPO

REPO

REPO

C C


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Horizontal Clustering

Clustering across different Business Areas within a single facility. Paragon will only allow

for the creation of Horizontal Clustered Portfolios in the case of collateralised portfolios.

Exception to the above rule is Repos where Paragon does allow its inclusion into aHorizontal Clustered Portfolio regardless of whether or not the collateralised flag for thefacility has been turned on.

Tata Group

Tata AIG

TCS

Tata Sons Ltd ISDA-EQUIV

DB Lon

DB- Tokyo

Facility 1

Legal Agreement DB Entity Business Area Facility

ISDA-EQUIV DB- HK

ISDA-EQUIV DB- SNG Facility 2

Facility 3

Facility 4

FX

ENERGY

BONDOPTIONS

BASE METAL

ISDA-EQUIV REPO

REPO

REPO

REPO

Clustering Concepts


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M i t i Li it


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Maintain Limit

This screen is used to capture CCE and PFE limits against the Tenors

Vi T d D t il


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View Trade Details

This screen is used to view the trades which have happened as per the facility .Trade(transactions) data is fed from the source systems into Paragon and mapping of the trades

is done manually by Credit Operations team.


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Portfolio

Facility

Miscellaneous

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P d t G O i


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This is one of the most important screens in Paragon . It shows a full summary of thefacilities , limits, exposures and trades for a counterparty

It also provides navigation to various other screens and serve as a entry point to create

facilities, Netting and Clustered Portfolio Each risk module in Paragon has its own PGO screen and navigation to other modulesPGO is provided from each of these screens .Hence by going into one PGO user cannavigate across module data and perform the required activities


PGO Key Elements


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PGO Key Elements

This panel shows thecounterparty hierarchyand the details of theselected counterparty

Buttons provided for navigatingto other modules PGO

Option to toggle betweendisplay of live and pendinglimits and net and gross

utilization

This panel gives the

summary of theaggregated limits, facilitydetails etc

This panel shows the

Counterparty aggregatedlimit and utilization &availability

This panel shows theGroup level aggregatedlimit and utilization &availability


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Portfolio

Facility

Miscellaneous

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CSA ID Search


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CSA ID Search

On entering the CSA (Credit Support Annexure) ID the CSA ID & the correspondingfacility ID gets displayed.

Delete Zero Limit


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Delete Zero Limit

To delete the Zero Limit , from the counterparty list , select the counterparty ,right click andclick delete Zero limits.

Post deletion the status will change to Pend-closure. Post credit application process the

Zero Limit would be finally deleted.


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traded products

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